Ottawa is prepared to let Canada's two financially troubled car makers collapse rather than provide long-term financing to companies without a viable future, Industry Minister Tony Clement said Thursday as he ratcheted up the pressure on the Canadian Auto Workers union to negotiate new deals to slash wages and benefits.
Mr. Clement told a news conference in Toronto he believes Fiat SpA is taking a "logical position" in demanding wage concessions in Canada before following through with a proposed strategic alliance with Chrysler LLC. He added Ottawa is also unwilling to make major investments in companies that do not have appropriate cost structures to survive in the long term.
When asked whether he would be willing to let Chrysler Canada Inc. or General Motors of Canada Ltd. go bankrupt if the unions do not agree to cut costs, Mr. Clement replied: "We have to examine every possibility."
"I don't think it is in the interest of the Canadian public to have continued funding to a company if there is no deal with their union and if there is no outside investor, or no outside partner in the case of Fiat," he said. "Those were our conditions.... So if you're asking me whether I'm willing to funnel Canadian government money, taxpayer money, when we do not have an acceptable plan on a go-forward basis, I cannot do that. I don't think it would be responsible."
CAW president Ken Lewenza has called Fiat's proposal to cut labour costs at Chrysler Canada by $19 an hour an "unreasonable" demand and has said it is "not going to happen," arguing the CAW is competitive with unionized environments in the United States.
In response Thursday, Mr. Clement said he appreciates it is a difficult reality for the union to accept, especially since the car makers have had a tradition of pattern bargaining where the union strikes a deal with one of the Detroit Three car makers and it sets a pattern for the others. But he said it is time for the CAW to accept it has to break the pattern in terms of cost reductions with Chrysler.
"If everyone is saying - and they are saying - that Chrysler in order to be competitive has to go beyond the pattern in terms of cost reductions and cost competitiveness, I believe the CAW has to have regard for that," he said.
The Canadian and U.S. governments have given Chrysler until April 30 to come up with a viable long-term restructuring plan before they will provide financing to bail it out.
"I know this is difficult," Mr. Clement said. "I know this affects real workers in real towns and cities across Ontario. This is not an easy thing. But the alternative is that there is no deal in place. And if there is no deal in place, there will not be long-term funding arrangements with the government of Canada. And in fact we have the right to call our loans."
Mr. Clement was speaking in Toronto at a news conference to announce a new $145-million program called Automotive Partnership Canada to provide funding over the next five years to university researchers to develop new technologies with direct applicability to the automotive sector.
The program was designed after consultations with industry officials, who said they want the money to focus on specific areas including the use of alternative fuels, manufacturing with lighter-weight materials and next-generation manufacturing techniques.